All upcoming sessions may reserve surprises

The global strategist remains cautious on equity markets, even if it is not currently considering a scenario of deflation.

How do you explain the recent decline in the markets

The latest statistics showed an acceleration in the pace of degradation of the economy. The world fell at a rate more important than initially planned and the decline in activity and employment is greatest. This concerns about deflation, with prices decreasing were added to the consumption in the United States.

Can we really fear deflation

Deflation is a real risk, even if it is not our central scheme. I do not think that the United States enter a scenario to the Japanese, with the timeliness of responses to the US Federal Reserve. The Fed has taken many measures in the past 18 months, while the Bank of Japan had put several years to adjust its monetary policy. Prices should fall in the US but 2.2 on an annual basis, the price index for consumption (excluding food and energy) is above the objectives of the Federal Reserve. The real concern would be a continuation of the decline in prices, combined with an acceleration of the decline in confidence of consumers and activity indices. In which case, the effect on the market could be major. One might see a plunge of awards over several months or even several years.

Is this the time to return to the markets

The recession will be global, relatively sharp and deep for at least six months. Should still be restrictions on the credit of companies and the winding-up of stocks of companies. In this context, it is difficult to be positive on the market on the sole argument to attractive valuations. We are therefore "neutral" on the shares in our strategic allocation, but we do not exclude a rebound. Thus, we recently adopted a slight "overweights" battle in a short-term perspective.

How do you see the market in the coming months

The markets are certainly close to their low points but could still go down below. All upcoming sessions may reserve surprises. We do not targets on indices, but 2009 promises to be difficult on stock plan.

What will be the signals of purchase

Visibility should be mid-2009. At that time, should have seen much of the decline in the market. But it will take a combination of factors to become positive actions: statistics showing that the housing market is better, a marked improvement on the currency market, signs that the recapitalisations go well, new currency flexibility... The next few months will be punctuated by new gestures of relaxation: the Fed could cut rates by 50 basis in December points, but will mainly increase the liquidity injections. The rate of the European Central Bank is expected to be below 2 in the twelve months and that of the Bank of England will, in our view, closer to 1.

What geographical area do you

We prefer the US to Europe, but for about two months, the preference is less clear in the anticipation of decreases of rates in Europe and less negative Outlook on the banking sector.